Purchasing Power- Definition, Latest News and Why
Every sector of the economy is affected due to the change in purchasing power, starting from the consumer, investors, shareholders, etc. You will also see various fluctuations in the stock market. This article will tell you about purchasing power, along with stating its importance, and the latest news in our country; India.
Keep on reading the article for further information…
Purchasing power is termed as the value of a currency that is expressed in terms of the number of goods or services that can be bought by one unit of money in a given span of time. It is also known as ‘buying power’ in economic theory’s concept. Purchasing power impacts stock prices and the economic growth of the business. Purchasing power is not always fixed it keeps on changing as per inflation or Deflation in the market. ?As inflation lowers and deflation increases the value of the purchasing power.
In the traditional economic time, to measure purchasing power, it was compared with the Consumer Price Index which denotes the change in prices paid by consumers for goods and services.
Purchasing price parity (PPP) terms come up when we mention purchasing power, it allows economists to compare countries based on economic productivity and standards of living.
The consumer loses their purchasing or buying power when the price rise and recovers it when the price fall. The factors that make the purchasing power weak are government regulation, manmade or natural calamities, and the most precise reason; inflation. Innovation, technology, and deflation help to retain purchasing power.
Latest News:
Finance Minister Nirmala Sitharaman on Tuesday tabled the Economic Survey 2022-23 in Parliament. One of the key takeaways of the survey, India is now the third-largest economy in the world in PPP (purchasing power parity) terms and; the 5th largest in terms of the exchange rate. Only US and China are ahead of India when it comes to purchasing power parity, the survey highlighted. Purchasing power parity control for the differences in price levels between economies and equalize the purchasing power of currencies. In this way, PPPs show the relative price of a given basket of goods and services in each of the economies being compared with reference to a base economy.
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Reference link: https://www.india.com/business/economic-survey-2022-23-key-takeaways-india-3rd-largest-economy-in-purchasing-power-economic-survey-5877020/
The revision in income tax rates will increase the purchasing power of the middle-class sections of the society and thus, push the economic growth of the country in the long run, Kolkata-headquartered Bandhan Bank's founder, Managing Director and Chief Executive Chandra Sekhar Ghosh said.
According to him, the increase in the purchasing capability of the middle class will push the demands of the products and this will positively impact the economy of the nation. "Of course, there is an expression of shooting up of inflation slightly because of this increase in the purchasing capacity of the middle class. However, considering the multiple positive aspects of the tax rate revision, in my opinion, that threat will not impact the economy in a major way," Ghosh said.
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